-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JSUYIhYh+oJ5TBgjLv7Xzea2/aBL8FyLsuzKnaGEpHVR0rvn2ZHmMXyGAviPqZiN MedskdaulA+8Lc6F27K9lQ== 0000950144-97-009805.txt : 19970912 0000950144-97-009805.hdr.sgml : 19970912 ACCESSION NUMBER: 0000950144-97-009805 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970905 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHICOS FAS INC CENTRAL INDEX KEY: 0000897429 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 592389435 STATE OF INCORPORATION: FL FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21258 FILM NUMBER: 97675651 BUSINESS ADDRESS: STREET 1: 11215 METRO PKWY CITY: FT MYERS STATE: FL ZIP: 33912-1206 BUSINESS PHONE: 8134335505 MAIL ADDRESS: STREET 1: 11215 METRO PKY CITY: FT MYERS STATE: FL ZIP: 33912-1206 10-Q 1 CHICO'S FAS, INC. FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT For the Quarter Ended: Commission File Number: August 2, 1997 0-21258 CHICO'S FAS, INC. (Exact name of registrant as specified in charter) Florida 59-2389435 (State of Incorporation) (I.R.S. Employer Identification No.) 11215 Metro Parkway, Fort Myers, Florida 33912 (Address of principal executive offices) 941-277-6200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. At September 4, 1997, there were 7,900,718 shares outstanding of Common Stock, $.01 par value per share. 2 CHICO'S FAS, INC. Index
PART I - Financial Information Page Item 1. Financial Statements (Unaudited): Condensed Balance Sheets - August 2, 1997 and February 1, 1997............................................3 Condensed Statements of Income for the Thirteen and Twenty-Six Week Periods Ended August 2, 1997 and July 28, 1996.....................................................................4 Condensed Statements of Cash Flows for the Twenty-Six Weeks Ended August 2, 1997 and July 28, 1996.....................................................................5 Notes to Condensed Financial Statements...................................................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................................7 PART II - Other Information Item 4. Submission of Matters to a Vote of Security Holders.............................................11 Item 6. Exhibits and Reports on Form 8-K................................................................13 Signatures ................................................................................................13
3 CHICO'S FAS, INC. Condensed Balance Sheets (Unaudited)
As of As of 8/2/97 2/1/97 ------------ ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 5,283,212 $ 832,176 Receivables, net 761,541 763,451 Inventories 6,193,796 7,845,362 Prepaid expenses 395,927 473,444 Deferred taxes 1,126,000 1,290,000 ------------ ------------ Total Current Assets 13,760,476 11,204,433 ------------ ------------ LAND, BUILDING AND EQUIPMENT: Cost 22,967,592 22,330,612 Less accumulated depreciation and amortization (5,953,007) (5,093,660) ------------ ------------ Land, Building and Equipment, Net 17,014,585 17,236,952 ------------ ------------ OTHER ASSETS: Certificate of Deposit 1,600,000 1,600,000 Deferred taxes 603,000 552,000 Other assets 683,409 654,673 ------------ ------------ Total Other Assets 2,886,409 2,806,673 ------------ ------------ $ 33,661,470 $ 31,248,058 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 3,677,339 $ 3,301,990 Accrued liabilities 2,857,865 2,461,026 Current portion of notes payable and lease obligations 365,817 456,602 ------------ ------------ Total Current Liabilities 6,901,021 6,219,618 ------------ ------------ NONCURRENT LIABILITIES: Notes and capital leases payable 5,530,545 5,604,677 Credit line payable -- 284,919 Deferred rent 1,202,856 1,118,246 ------------ ------------ Total Noncurrent Liabilities 6,733,401 7,007,842 ------------ ------------ STOCKHOLDERS' EQUITY: Common stock 78,991 78,841 Additional paid-in capital 7,591,997 7,555,708 Retained earnings 12,356,060 10,386,049 ------------ ------------ Total Stockholders' Equity 20,027,048 18,020,598 ------------ ------------ $ 33,661,470 $ 31,248,058 ============ ============
Page 3 See Accompanying Notes 4 CHICO'S FAS, INC. Condensed Statements of Income (Unaudited)
Twenty-Six Weeks Ended Thirteen Weeks Ended 8/2/97 7/28/96 8/2/97 7/28/96 ----------- ----------- ----------- ----------- Net Sales by Company Stores $37,972,393 $32,600,795 $19,675,946 $15,578,568 Net Sales to Franchisees 827,978 775,046 404,628 494,721 ----------- ----------- ----------- ----------- NET SALES 38,800,371 33,375,841 20,080,574 16,073,289 Cost of Goods Sold 17,278,890 13,432,773 9,162,530 5,992,868 ----------- ----------- ----------- ----------- Gross Profit 21,521,481 19,943,068 10,918,044 10,080,421 General, Administrative and Store Operating Expenses 18,035,809 16,382,731 9,220,508 8,426,631 ----------- ----------- ----------- ----------- Income from Operations 3,485,672 3,560,337 1,697,536 1,653,790 Interest Expense, Net 202,660 191,971 85,980 85,792 ----------- ----------- ----------- ----------- Income Before Taxes 3,283,012 3,368,366 1,611,556 1,567,998 Provision for Income Taxes 1,313,000 1,347,000 644,000 627,000 ----------- ----------- ----------- ----------- NET INCOME $ 1,970,012 $ 2,021,366 $ 967,556 $ 940,998 =========== =========== =========== =========== NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ 0.25 $ 0.25 $ 0.12 $ 0.11 =========== =========== =========== =========== Weighted average common and common equivalent shares outstanding 8,001,411 8,074,692 8,058,798 8,245,624 =========== =========== =========== ===========
Page 4 See Accompanying Notes 5 CHICO'S FAS, INC. Condensed Statements of Cash Flows (Unaudited)
Twenty-Six Weeks Ended 8/2/97 7/28/96 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,970,011 $ 2,021,367 ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,062,713 904,066 Deferred taxes 113,000 (43,000) Loss on disposal of property and equipment 126,502 133,069 Increase (decrease) in deferred rent 84,610 (23,041) Change in assets and liabilities: Decrease in receivables, net 1,910 348,867 Decrease (increase) in inventories 1,651,566 (1,014,794) Decrease in prepaids and other assets 49,945 23,774 Increase in accounts payable 375,349 866,516 Increase in accrued liabilities 315,173 1,706,198 ------------ ------------ Total adjustments 3,780,768 2,901,655 ------------ ------------ Net cash provided by operating activities 5,750,779 4,923,022 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of fixed assets 34,500 -- Purchase of land, buildings and equipment (902,512) (1,075,810) Purchase of intangible assets (100,000) (60,000) ------------ ------------ Net cash used in investing activities (968,012) (1,135,810) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 36,439 452,588 Credit line payments (284,919) (255,816) Principal payments on debt (83,251) (310,364) ------------ ------------ Net cash used in financing activities (331,731) (113,592) ------------ ------------ Net increase in cash and cash equivalents 4,451,036 3,673,620 CASH AND CASH EQUIVALENTS - Beginning of Period 832,176 544,366 ------------ ------------ CASH AND CASH EQUIVALENTS - End of Period $ 5,283,212 $ 4,217,986 ============ ============
Page 5 See Accompanying Notes 6 CHICO'S FAS, INC. Notes to Condensed Financial Statements August 2,1997 (Unaudited) I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation The accompanying unaudited condensed financial statements of Chico's FAS, Inc. (the "Company") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and notes thereto for the year ended February 1, 1997, included in the Company's Annual Report on Form 10-K filed on April 30, 1997. The February 1, 1997 balance sheet amounts included in this report were derived from audited financial statements included in the Company's Annual Report. Operating results for the twenty-six weeks ended August 2, 1997 are not necessarily indicative of the results that may be expected for the entire fiscal year. Net Income Per Common and Common Equivalent Share Net income per common and common equivalent share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the periods, adjusted to include the number of additional shares (112,041 and 231,763 for the twenty-six weeks ended August 2, 1997 and July 28, 1996, respectively and 164,176 and 373,710 for the thirteen weeks ended August 2, 1997 and July 28, 1996, respectively) that would have been outstanding if the stock options granted had been exercised, with the proceeds being used to buy shares from the market (i.e., the treasury stock method). Net income per common and common equivalent share represents both primary and fully diluted per share information. Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share" which establishes standards for computing and presenting earnings per share. The statement replaces the presentation of primary earnings per share on the income statement and provides for certain disclosures. The Company will adopt Statement No. 128 in the Fourth quarter of fiscal 1998 and does not believe the effect of adoption will be material. Page 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED AUGUST 2, 1997 COMPARED TO THE THIRTEEN WEEKS ENDED JULY 28, 1996. NET SALES. Net sales by Company-owned stores for the thirteen weeks ended August 2, 1997 increased by $4.1 million, or 26.3%, over net sales by Company-owned stores for the comparable twenty-six weeks ended July 28, 1996. The increase was the result of $1.8 million additional sales from the new (or reacquired) stores not yet included in the Company's comparable store base (net of sales of approximately $410,000 from four stores closed in 1996 and 1997), a comparable Company-owned store net sales increase of $2.0 million , and approximately $464,000 in additional sales resulting from the liquidation of inventory through an independent liquidator. Net sales to franchisees for the thirteen weeks ended August 2, 1997 decreased by approximately $90,000, or 18.2% compared to net sales to franchisees for the thirteen weeks ended July 28, 1996. The Company believes that the decrease in net sales to franchisees was primarily caused by the reacquisition of one franchise in fiscal 1998 and a decrease in purchases from the Company's largest franchisee. GROSS PROFIT. Gross profit for the thirteen weeks ended August 2, 1997, was $10.9 million, or 54.4% of net sales, compared with $10.1 million, or 62.7% of net sales for the thirteen weeks ended July 28, 1996. The decrease in the gross profit percentage primarily resulted from a revised merchandising strategy as the Company reduced price points to more effectively meet competitive price points and increased sales promotions and other markdowns at both front line and outlet stores in an effort to reduce the Company's levels of inventories, particularly older inventory that was being held at the Company's warehouse for future clearance. To a lesser degree, the decrease in gross margins resulted from (1) increased freight costs associated with an increased use of air shipments as the Company attempted to rapidly increase its in-store inventory levels of newer merchandise, (2) a sale, at cost, of approximately $464,000 of inventory to an independent liquidator, and (3) additional inventory charges associated with the remaining older designs and styles. GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative and store operating expenses increased to $9.2 million, or 45.9% of net sales, in the thirteen weeks ended August 2, 1997 from $8.4 million, or 52.4% of net sales, in the thirteen weeks ended July 28, 1996. The increase in general, administrative and store operating expenses was, for the most part, the result of increases in store operating expenses, including store compensation, occupancy and other costs associated with additional store openings. The decrease in these expenses as a percentage of net sales was principally due to direct store costs, including store compensation, which decreased by 4.1% of net sales due to leverage associated with the Company's 13.3% comparable store sales increase for the quarter, combined with improved management of store payroll costs. To a lesser degree, the decrease is also associated with the recognition of approximately $227,000 of net business interruption insurance proceeds related to the temporary closing of one of the Company's stores. INTEREST EXPENSE, NET. Net interest expense remained relatively level at approximately $86,000 in the thirteen weeks ended August 2, 1997 and in the thirteen weeks ended July 28, 1996. Although the net expense remained relatively level, the amount included an increase in gross interest expense attributable to an increase in the variable rate of the Company's mortgage note, offset by increased interest earnings from the Company's increased cash position. NET INCOME. As a result of the factors discussed above, net income reflects an increase of 2.8% to $1.0 million in the thirteen weeks ended August 2, 1997 from net income of approximately $941,000 in the thirteen weeks ended July 28, 1996. Page 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED AUGUST 2, 1997 COMPARED TO THE THIRTEEN WEEKS ENDED JULY 28, 1996. (CONTINUED) COMPARABLE COMPANY STORE NET SALES. Comparable Company store net sales increased by 13.3% in the thirteen weeks ended August 2, 1997 when compared to the comparable period in the thirteen weeks ended July 28, 1996. Comparable Company store net sales data is calculated based on the change in net sales of currently open Company-owned stores that have been operated as a Company store for at least thirteen months. The Company believes that the increase in comparable Company store net sales resulted primarily from the Company's return in June 1997 to its traditional Chico's look and pricing policies. The Company now believes it has returned to a reasonably desirable assortment, depth and inventory level of available merchandise. The Company also believes that the increase in comparable store sales was fueled by promotions, sales and markdowns of previous styles and designs as well as the Company's national sidewalk sale held in July 1997. RESULTS OF OPERATIONS - TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 COMPARED TO THE TWENTY-SIX WEEKS ENDED JULY 28, 1996. NET SALES. Net sales by Company-owned stores for the twenty-six weeks ended August 2, 1997 increased by $5.4 million, or 16.5%, over net sales by Company-owned stores for the comparable twenty-six weeks ended July 28, 1996. The increase was the result of $3.3 million additional sales from the new (or reacquired) stores not yet included in the Company's comparable store base (net of sales of approximately $656,000 from four stores closed in 1996 and 1997), a comparable Company-owned store net sales increase of $1.7 million, and approximately $464,000 in additional sales resulting from the liquidation of inventory through an independent liquidator. Net sales to franchisees for the twenty-six weeks ended August 2, 1997 increased by approximately $53,000, or 6.8% compared to net sales to franchisees for the twenty-six weeks ended July 28, 1996. The Company believes that the increase in net sales to franchisees was primarily caused by a significant decrease in the volume of returned merchandise under the Company's new return policy implemented in mid 1996, offset by the reacquisition of one franchise in fiscal 1998 and a decrease in purchases from the Company's largest franchisee. GROSS PROFIT. Gross profit for the twenty-six weeks ended August 2, 1997, was $21.5 million, or 55.5% of net sales, compared with $19.9 million, or 59.8% of net sales for the twenty-six weeks ended July 28, 1996. The decrease in the gross profit percentage primarily resulted from a revised merchandising strategy as the Company reduced price points to more effectively meet competitive price points and increased sales promotions and other markdowns at both front line and outlet stores in an effort to reduce the Company's levels of inventories, particularly older inventory that was being held at the Company's warehouse for future clearance. To a lesser degree, the decrease in gross margins resulted from (1) increased freight costs associated with an increased use of air shipments as the Company attempted to rapidly increase its in-store inventory levels of newer merchandise, (2) a sale, at cost, of approximately $464,000 of inventory to an independent liquidator, and (3) additional inventory charges associated with the remaining older designs and styles. The company is making efforts to improve gross margin by several percentage points over the 55.5% gross margin for the 26 weeks ended August 2, 1997. Page 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS - TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 COMPARED TO THE TWENTY-SIX WEEKS ENDED JULY 28, 1996. (CONTINUED) GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative and store operating expenses increased to $18.0 million, or 46.5% of net sales, in the twenty-six weeks ended August 2, 1997 from $16.4 million, or 49.1% of net sales, in the twenty-six weeks ended July 28, 1996. The increase in general, administrative and store operating expenses was, for the most part, the result of increases in store operating expenses, including store compensation, occupancy and other costs associated with additional store openings. The decrease in these expenses as a percentage of net sales was principally due to direct store costs which decreased by 1.3% of net sales due to leverage associated with the Company's 5.8% comparable store sales increase. To a lesser degree, the decrease is also attributable to the insurance proceeds discussed in "Results of Operations-Thirteen Weeks ended August 2, 1997", but was offset by an increase in marketing expenses as a percent of sales. INTEREST EXPENSE, NET. Net interest expense increased to approximately $203,000 in the twenty-six weeks ended August 2, 1997 from approximately $192,000 in the twenty-six weeks ended July 28, 1996. This increase was primarily a result of an increase in the variable interest rate associated with the Company's mortgage note. NET INCOME. As a result of the factors discussed above, net income reflects a decrease of 2.5% to $1.97 million in the twenty-six weeks ended August 2, 1997 from net income of $2.02 million in the twenty-six weeks ended July 28, 1996. COMPARABLE COMPANY STORE NET SALES. Comparable Company store net sales increased by 5.8% in the twenty-six weeks ended August 2, 1997 when compared to the comparable period in the twenty-six weeks ended July 28, 1996. Comparable Company store net sales data is calculated based on the change in net sales of currently open Company-owned stores that have been operated as a Company store for at least thirteen months. The Company believes that the increase in comparable Company store net sales resulted primarily form the Company's return in June 1997 to its traditional Chico's look and pricing policies. The Company now believes it has returned to a reasonably desirable assortment, depth and inventory level of available merchandise. The Company also believes that the increase in comparable store sales was fueled by promotions, sales and markdowns of previous styles and designs as well as the Company's national sidewalk sale held in July 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's primary ongoing capital requirements are for funding capital expenditures related to new store openings and merchandise inventory purchases. During the twenty-six weeks ended August 2, 1997 (fiscal 1998) and the twenty-six weeks ended July 28,1996 (fiscal 1997), the Company's primary source of working capital was cash flow from operations of $5.8 million and $4.9 million, respectively. The increase in cash flow from operations was primarily due to a decrease in inventories by $1.7 million in the first twenty-six weeks of fiscal 1998, as compared to an increase of $1.0 million in the first twenty-six weeks of fiscal 1997. The decrease in inventories was primarily due to the Company's ongoing effort through markdowns, promotions, sales, and liquidation to reduce the balance of goods held at the Company's distribution center. This increase in cash flow from operations was offset by a increase in accounts payable and accrued liabilities in fiscal 1998 of approximately $691,000, versus a increase in accounts payable and accrued liabilities of $2.6 million in fiscal 1997. The increase in the fiscal 1997 accounts payable and accrued liabilities was principally caused by the timing of inventory receipts as well as the timing of income tax estimate payments. To a lesser degree, the increase in cash flow from operations was offset by a decrease in receivables of approximately $2,000 in fiscal 1998, versus a decrease in receivables of approximately $349,000 in fiscal 1997. Page 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) The Company invested approximately $903,000 during the first twenty-six weeks of fiscal 1998 for capital expenditures primarily associated with the opening of six new (or reacquired) stores, the relocating of three existing stores and the remodeling of several existing stores. In addition, the Company invested $100,000 in intangible assets associated with the reacquisition of one franchised store. The Company also sold a small piece of land it originally acquired for its headquarters (with a cost of approximately $60,000) for approximately $35,000. The Company also closed during this period two stores, has since closed two additional stores in August 1997 and intends to close one more store this fiscal year. During the first twenty-six weeks of fiscal 1997, the Company invested $1.1 million for capital expenditures associated with the opening of three new stores, the remodeling of four existing stores and a companywide refixturing program which continued throughout fiscal 1997. The Company repaid under its then available credit lines approximately $285,000 and $256,000 in the first twenty-six weeks of fiscal 1998 and 1997, respectively. In addition, the Company repaid other indebtedness of approximately $83,000 and $310,000 in the same periods. As more fully described in "Item 1-Business" appearing on pages 13 through 16 of the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1997, the Company is subject to ongoing risks associated with imports. The Company's reliance on sourcing from foreign countries causes the Company to be exposed to certain unique business and political risks. Import restrictions, including tariffs and quotas, and changes in such tariffs or quotas could affect the importation of apparel generally and, in that event, could increase the cost or reduce the supply of apparel available to the Company and have an adverse effect on the Company's business, financial condition and/or results of operations. The Company's merchandise flow could also be adversely affected by political instability in any of the countries in which its goods are manufactured, by significant fluctuations in the value of the U.S. dollar against applicable foreign currencies and by restrictions on the transfer of funds. The Company plans to open approximately 10 to 12 new stores in fiscal 1998, 6 of which were open as of August 31, 1997 and the Company plans to open 16 to 20 new stores in fiscal 1999. The Company believes that the liquidity needed for its planned new store growth, remodel program and maintenance of proper inventory levels associated with this growth will be funded primarily from cash flow from operations. The Company further believes that this liquidity will be sufficient, based on currently planned new store openings, to fund anticipated capital needs over the near-term, including scheduled debt repayments. If cash flow from operations should prove to be less than anticipated or if there should arise a need for additional letter of credit capacity due to establishing new and expanded sources of supply, or if the Company were to increase the number of new Company stores planned to be opened in future periods, the Company might need to seek other sources of financing to conduct its operations or pursue its expansion plans and there can be no assurance that such other sources of financing would be available. SEASONALITY AND INFLATION The Company has historically experienced, and expects to continue to experience, seasonal fluctuations in its sales and net income. Historically, a greater portion of the Company's sales have been realized during the period from approximately November 1 through March 31, thus impacting the first and fourth quarters. Historically, sales generated during this period have had a significant impact on the Company's results of operations. Fewer of the Company's new stores have been opened in warm-weather tourist locations and, as a result, the difference in sales and net income during these quarters of the fiscal year has been reduced. Page 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) SEASONALITY AND INFLATION (CONTINUED) Even though the Company is not as dependent on the Christmas selling season as many other retailers are, sales in the months of November and December are still expected to continue to represent, in the future, a greater portion of the Company's sales. If for any reason the Company's sales during November and December do not represent increased sales activity as compared with the remainder of the year (as was the case in fiscal 1997 ), or if there is a decrease in availability of working capital in the months prior to November and December, the Company's profitability could be materially and adversely affected. The Company's quarterly results of operations may also fluctuate significantly as a result of a variety of factors, including the timing of new stores openings, the net sales contributed by new stores, and store closings. Although the operations of the Company are influenced by general economic conditions, the Company does not believe that inflation has had a material effect on the results of operations during the first twenty-six weeks of fiscal 1998 and during the first twenty-six weeks of fiscal 1997. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS This 10-Q may contain forward looking statements which reflect the current views of the Company with respect to certain events that could have an effect on the Company's future financial performance. These statements include the words "expects," "believes," and similar expressions. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. These potential risks and uncertainties include ability to secure customer acceptance of Chico's styles, propriety of inventory mix and sizing, quality of merchandise received from vendors, timeliness of vendor production and deliveries, increased competition, extent of the market demand by women for private label clothing and related accessories, adequacy and perception of customer service, ability to coordinate product development along with buying and planning, rate of new store openings, performance of management information systems, ability to hire, train, energize and retain qualified sales associates and other employees, availability of quality store sites, ability to hire and retain qualified managerial employees and other risks. In addition, there are potential risks and uncertainties that are peculiar to the Company's heavy reliance on sourcing from foreign vendors including the impact of work stoppages, transportation delays and other interruptions, political instability, foreign currency fluctuations, imposition of and changes in tariffs and import and export controls such as import quotas, changes in governmental policies in or towards such foreign countries and other similar factors. Page 11 12 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of the Shareholders of the Company was held on June 17, 1997. There were 7,884,118 shares of Common Stock entitled to vote. The following matters were voted upon at the meeting: (a) Board of directors proposal to approve an increase in the number of members of the Board of Directors from five members to six members through the addition of one Class III Director position. Voting Results: For the proposal: 7,314,619 Against the proposal: 101,788 Abstentions: 31,465
(b) Election of Directors--
Votes Votes For Withheld Class I - Term Expiring in 2000: ------------ ---------- Charles J. Kleman 6,984,030 463,842 Ross E. Roeder 7,327,230 120,642 Class III - Term Expiring in 1999: John Burden 7,378,330 69,542
The terms of office for the other directors continued after the meeting as follows: Marvin J. Gralnick (1999), Helene B. Gralnick (1998), and Verna Gibson (1998). (c) Board of Directors proposal to ratify the appointment of Arthur Andersen LLP as independent certified public accountants. Voting Results: For the proposal: 7,403,203 Against the proposal: 19,684 Abstentions: 24,985
Page 12 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.1 Nonemployee Stock Option Agreement by and between Chico's FAS, Inc. and Verna Gibson dated May 13, 1997 10.2 Nonemployee Stock Option Agreement by and between Chico's FAS, Inc. and Ross Roeder dated June 17, 1997 10.3 Nonemployee Stock Option Agreement by and between Chico's FAS, Inc. and John Burden dated June 17, 1997 10.4 Nonemployee Stock Option Agreement by and between Chico's FAS, Inc. and Verna Gibson dated June 17, 1997 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K: The Company did not file any reports on Form 8-K during the twenty-six weeks ended August 2, 1997
SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: September 4, 1997 By: /s/ Marvin Gralnick --------------------- ---------------------------- Marvin Gralnick Chief Executive Officer (Principal Executive Officer) Date: September 4, 1997 By: /s/ Charles J. Kleman ---------------------- ---------------------------- Charles J. Kleman Chief Financial Officer (Principal Financial and Accounting Officer) Page 13 EX-10.1 2 STOCK OPTION AGREEMENT WITH VERNA GIBSON (5/13/97) 1 EXHIBIT 10.1 NONEMPLOYEE DIRECTOR'S STOCK OPTION AGREEMENT THIS AGREEMENT is made this 13th day of May, 1997 but is effective as of the 13th day of May, 1997, between CHICO'S FAS, Inc., a Florida corporation ("Chico's") and Verna K. Gibson, a nonemployee member of Chico's Board of Directors (the "Director"). W I T N E S S E T H WHEREAS, the Director is now a member of Chico's Board of Directors and Chico's desires to have the Director remain in its service and desires to encourage stock ownership by the Director and to increase the Director's proprietary interest in Chico's success; and as an inducement thereto has determined to grant to the Director the option herein provided for, to the end that the Director may thereby be assisted in obtaining an interest, or an increased interest, as the case may be, in the stock ownership of Chico's. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows: 1. Grant. Chico's hereby grants to the Director an option (the "Option") to purchase 20,000 shares of Chico's common stock, par value $.01 per share ("Common Stock") at $3.25 per share, both as adjusted pursuant to Section 10 hereof. 2. Exercise. The Option may be exercised at any time during the period hereinafter permitted by presentation at the principal offices of Chico's in Ft. Myers, Florida of (a) written notice to Chico's advising Chico's of the election of the Director to purchase the shares of Common Stock covered by this Option and (b) payment of the aggregate option price therefor. 3. Period of Exercise. The Option is exercisable in whole or from time to time in part during the period from November 13, 1997 through May 13, 2007, except as provided in Section 8 hereof. 4. Vesting Schedule. The Optionee's rights under the Option shall vest 100% on November 13, 1997. 5. Requirements of Law. Chico's shall not be required to sell or issue any shares under the Option if the issuance of such shares shall constitute a violation of any provisions of any law or regulation of any governmental authority. Specifically, in connection with the Securities Act of 1933 (the "Act"), upon exercise of the Option, unless a registration statement under the Act is in effect with respect to the shares of Common Stock covered by the Option, Chico's shall not be required to issue such shares unless Chico's has received evidence reasonably satisfactory to the effect that the Director is acquiring such shares for investment and not with a view to the distribution thereof, and unless the certificate issued representing the shares of Common Stock bears the following legend: 2 "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS AMENDED AND APPLICABLE STATE SECURITIES LAWS." Any reasonable determination in this connection by Chico's shall be final, binding and conclusive. At such time as a registration statement under the Act is in effect with respect to the shares of Common Stock represented by certificates bearing the above legend or at such time as, in the opinion of counsel for Chico's, such legend is no longer required solely for compliance with applicable securities laws, then the holders of such certificates shall be entitled to exchange such certificates for certificates representing a like number of shares but without such legend. Chico's may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Act. Chico's shall not be obligated to take any other affirmative action in order to cause the exercise of the Option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority. 6. Method of Payment. Payment shall be made: (a) in United States dollars by certified check, or bank draft or (b) by tendering to Chico's Common Stock shares owned by the person exercising the Option and having a fair market value equal to the cash exercise price applicable to such Option, such fair market value to be the closing price, on the date in question (or, if no shares are traded on such day, on the next preceding day on which shares were traded), of the Common Stock as reported on the Composite Tape, or if not reported thereon, then such price as reported in the trading reports of the principal securities exchange in the United States on which such stock is listed, or if such stock is not listed on a securities exchange in the United States, the mean between the dealer closing "bid" and "ask" prices on the over-the-counter market as reported by the National Association of Security Dealers Automated Quotation System (NASDAQ), or NASDAQ's successor, or if not reported on NASDAQ, the fair market value of such stock as determined by the Board in good faith and based on all relevant factors, or (c) by a combination of United States dollars and Common Stock shares as aforesaid. 2. 3 7. Transferability of Option. The Option shall not be transferable by the Director otherwise than by will or the laws of descent and distribution, and shall be exercisable during his lifetime only by him. 8. Termination of Service, Death, Disability and Change in Control. Except as may be otherwise expressly provided in this Agreement, the Option herein granted shall terminate and all rights to exercise hereunder shall terminate (a) immediately in the event of the Director's discontinuance of service on Chico's Board of Directors as a result of his or her removal for cause and (b) seven (7) months after the date of the Director's discontinuance of service on Chico's Board of Directors for any other reason, other than death, disability or retirement. In the event of the death, disability or retirement of the Director while a member of the Board of Directors and before the date of expiration of the Option, the Option shall terminate and all rights to exercise hereunder shall terminate on the earlier of such date of expiration or one year following the date of such death, disability or retirement. After the death of the Director, his executors or administrators, or any person or persons to whom the Option may be transferred by will or by the laws of descent and distribution, shall have the right, at any time prior to such termination, to exercise the Option pursuant to the terms of this Agreement. If there shall occur a change in control of Chico's while any shares of Common Stock remain subject to this Option, then the Option shall become immediately exercisable without regard to Section 2 hereof and such exercisability shall terminate only pursuant to Section 2 hereof without regard to the other provisions of this Section 8. For purposes of this Agreement, a "change in control" of Chico's shall mean a change in control of a nature that would be required to reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1931 (the "Exchange Act") as in effect on the date hereof; provided, that, without limitation, such a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the Exchange Act and other than the persons who are directors on the date of this Agreement) is or becomes the beneficial owner, directly or indirectly, of securities of Chico's representing 20% or more of the combined voting power of Chico's then outstanding securities or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Chico's cease for any reason to constitute at least a majority thereof. 9. No Rights as Stockholder. The Director shall have no rights as a stockholder with respect to shares covered by the Option until the date of issuance of a stock certificate for such shares; no adjustment for dividends, or otherwise, except as provided in 3. 4 Section 10, shall be made if the record date therefor is prior to the date of exercise of such option. 10. Stock Adjustments. (a) In the event of any increase or decrease in the number of issued shares of Common Stock resulting from a stock split or other division or consolidation of shares or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of such shares effected without any receipt of consideration by Chico's, then, in any such event, the number of shares of Common Stock covered by the Option, and the purchase price per share of Common Stock covered by the Option shall be proportionately and appropriately adjusted for any such increase or decrease. (b) Subject to any required action by the stockholders, if any change occurs in the shares of Common Stock by reason of any recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or of any similar change affecting the shares of Common Stock, then, in any such event, the number and type of shares covered by the Option, and the purchase price per share of Common Stock covered by the Option, shall be proportionately and appropriately adjusted for any such change. A dissolution or liquidation of Chico's shall cause each outstanding Option to terminate. (c) In the event of a change in the Common Stock as presently constituted that is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any change shall be deemed to be shares of Common Stock within the meaning of this Agreement. (d) To the extent that the foregoing adjustments relate to stock or securities of Chico's, such adjustments shall be made by, and in the discretion of, the Board, whose determination in that respect shall be final, binding and conclusive. (e) Except as hereinabove expressly provided in this Section 10, the Director shall have no rights by reason of any division or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger or consolidation, or spin-off of assets or stock of another corporation; and any issuance by Chico's of convertible into shares of stock of any class, or warrants or options for shares of stock of any class shall not affect, and no adjustment by reason thereof shall be made with respect to, 4. 5 the number or price of shares of Common Stock subject to the Option. (f) The grant of this Option shall not affect in any way the right or power of Chico's to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate, or to dissolve, to liquidate, to sell, or to transfer all or any part of its business or assets. 11. Withholding. It shall be a condition to the obligation of Chico's to issue Common Stock shares upon exercise of an Option, that the Director (or any beneficiary or person entitled to act under Section 8 above) pay to Chico's, upon its demand, such amount as may be requested by Chico's for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, Chico's may refuse to issue Common Stock shares. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CHICO'S FAS, INC. By: /s/ Marvin J. Gralnick ----------------------------------- President /s/ Verna K. Gibson -------------------------------------- Verna K. Gibson, Director 5. EX-10.2 3 STOCK OPTION AGREEMENT WITH ROSS ROEDER 1 EXHIBIT 10.2 NONEMPLOYEE DIRECTOR'S STOCK OPTION AGREEMENT THIS AGREEMENT is made this 19th day of August, 1997 but is effective as of the 17th day of June, 1997, between CHICO'S FAS, Inc., a Florida corporation ("Chico's") and Ross E. Roeder, a nonemployee member of Chico's Board of Directors (the "Director"). W I T N E S S E T H WHEREAS, the Director is now a member of Chico's Board of Directors and Chico's desires to have the Director remain in its service and desires to encourage stock ownership by the Director and to increase the Director's proprietary interest in Chico's success; and as an inducement thereto has determined to grant to the Director the option herein provided for, to the end that the Director may thereby be assisted in obtaining an interest, or an increased interest, as the case may be, in the stock ownership of Chico's. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows: 1. Grant. Chico's hereby grants to the Director an option (the "Option") to purchase 10,000 shares of Chico's common stock, par value $.01 per share ("Common Stock") at $5.0625 per share, both as adjusted pursuant to Section 10 hereof. 2. Exercise. The Option may be exercised at any time during the period hereinafter permitted by presentation at the principal offices of Chico's in Ft. Myers, Florida of (a) written notice to Chico's advising Chico's of the election of the Director to purchase the shares of Common Stock covered by this Option and (b) payment of the aggregate option price therefor. 3. Period of Exercise. The Option is exercisable in whole or from time to time in part during the period from December 17, 1997 through June 17, 2007, except as provided in Section 8 hereof. 4. Vesting Schedule. The Optionee's rights under the Option shall vest 100% on December 17, 1997. 5. Requirements of Law. Chico's shall not be required to sell or issue any shares under the Option if the issuance of such shares shall constitute a violation of any provisions of any law or regulation of any governmental authority. Specifically, in connection with the Securities Act of 1933 (the "Act"), upon exercise of the Option, unless a registration statement under the Act is in effect with respect to the shares of Common Stock covered by the Option, Chico's shall not be required to issue such shares unless Chico's has received evidence reasonably satisfactory to the effect that the Director is acquiring such shares for investment and not with a view to the distribution thereof, and unless the certificate issued representing the shares of Common Stock bears the following legend: 2 "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS AMENDED AND APPLICABLE STATE SECURITIES LAWS." Any reasonable determination in this connection by Chico's shall be final, binding and conclusive. At such time as a registration statement under the Act is in effect with respect to the shares of Common Stock represented by certificates bearing the above legend or at such time as, in the opinion of counsel for Chico's, such legend is no longer required solely for compliance with applicable securities laws, then the holders of such certificates shall be entitled to exchange such certificates for certificates representing a like number of shares but without such legend. Chico's may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Act. Chico's shall not be obligated to take any other affirmative action in order to cause the exercise of the Option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority. 6. Method of Payment. Payment shall be made: (a) in United States dollars by certified check, or bank draft or (b) by tendering to Chico's Common Stock shares owned by the person exercising the Option and having a fair market value equal to the cash exercise price applicable to such Option, such fair market value to be the closing price, on the date in question (or, if no shares are traded on such day, on the next preceding day on which shares were traded), of the Common Stock as reported on the Composite Tape, or if not reported thereon, then such price as reported in the trading reports of the principal securities exchange in the United States on which such stock is listed, or if such stock is not listed on a securities exchange in the United States, the mean between the dealer closing "bid" and "ask" prices on the over-the-counter market as reported by the National Association of Security Dealers Automated Quotation System (NASDAQ), or NASDAQ's successor, or if not reported on NASDAQ, the fair market value of such stock as determined by the Board in good faith and based on all relevant factors, or (c) by a combination of United States dollars and Common Stock shares as aforesaid. 2. 3 7. Transferability of Option. The Option shall not be transferable by the Director otherwise than by will or the laws of descent and distribution, and shall be exercisable during his lifetime only by him. 8. Termination of Service, Death, Disability and Change in Control. Except as may be otherwise expressly provided in this Agreement, the Option herein granted shall terminate and all rights to exercise hereunder shall terminate (a) immediately in the event of the Director's discontinuance of service on Chico's Board of Directors as a result of his or her removal for cause and (b) seven (7) months after the date of the Director's discontinuance of service on Chico's Board of Directors for any other reason, other than death, disability or retirement. In the event of the death, disability or retirement of the Director while a member of the Board of Directors and before the date of expiration of the Option, the Option shall terminate and all rights to exercise hereunder shall terminate on the earlier of such date of expiration or one year following the date of such death, disability or retirement. After the death of the Director, his executors or administrators, or any person or persons to whom the Option may be transferred by will or by the laws of descent and distribution, shall have the right, at any time prior to such termination, to exercise the Option pursuant to the terms of this Agreement. If there shall occur a change in control of Chico's while any shares of Common Stock remain subject to this Option, then the Option shall become immediately exercisable without regard to Section 2 hereof and such exercisability shall terminate only pursuant to Section 2 hereof without regard to the other provisions of this Section 8. For purposes of this Agreement, a "change in control" of Chico's shall mean a change in control of a nature that would be required to reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1931 (the "Exchange Act") as in effect on the date hereof; provided, that, without limitation, such a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the Exchange Act and other than the persons who are directors on the date of this Agreement) is or becomes the beneficial owner, directly or indirectly, of securities of Chico's representing 20% or more of the combined voting power of Chico's then outstanding securities or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Chico's cease for any reason to constitute at least a majority thereof. 9. No Rights as Stockholder. The Director shall have no rights as a stockholder with respect to shares covered by the Option until the date of issuance of a stock certificate for such shares; no adjustment for dividends, or otherwise, except as provided in 3. 4 Section 10, shall be made if the record date therefor is prior to the date of exercise of such option. 10. Stock Adjustments. (a) In the event of any increase or decrease in the number of issued shares of Common Stock resulting from a stock split or other division or consolidation of shares or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of such shares effected without any receipt of consideration by Chico's, then, in any such event, the number of shares of Common Stock covered by the Option, and the purchase price per share of Common Stock covered by the Option shall be proportionately and appropriately adjusted for any such increase or decrease. (b) Subject to any required action by the stockholders, if any change occurs in the shares of Common Stock by reason of any recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or of any similar change affecting the shares of Common Stock, then, in any such event, the number and type of shares covered by the Option, and the purchase price per share of Common Stock covered by the Option, shall be proportionately and appropriately adjusted for any such change. A dissolution or liquidation of Chico's shall cause each outstanding Option to terminate. (c) In the event of a change in the Common Stock as presently constituted that is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any change shall be deemed to be shares of Common Stock within the meaning of this Agreement. (d) To the extent that the foregoing adjustments relate to stock or securities of Chico's, such adjustments shall be made by, and in the discretion of, the Board, whose determination in that respect shall be final, binding and conclusive. (e) Except as hereinabove expressly provided in this Section 10, the Director shall have no rights by reason of any division or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger or consolidation, or spin-off of assets or stock of another corporation; and any issuance by Chico's of shares of stock of any class, securities convertible into shares of stock of any class, or warrants or options for shares of stock of any class shall not affect, and no adjustment by reason thereof shall be made with respect to, 4. 5 the number or price of shares of Common Stock subject to the Option. (f) The grant of this Option shall not affect in any way the right or power of Chico's to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate, or to dissolve, to liquidate, to sell, or to transfer all or any part of its business or assets. 11. Withholding. It shall be a condition to the obligation of Chico's to issue Common Stock shares upon exercise of an Option, that the Director (or any beneficiary or person entitled to act under Section 8 above) pay to Chico's, upon its demand, such amount as may be requested by Chico's for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, Chico's may refuse to issue Common Stock shares. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CHICO'S FAS, INC. By /s/ Marvin J. Gralnick --------------------------------- President /s/ Ross E. Roeder ----------------------------------- Ross E. Roeder, Director 5. EX-10.3 4 STOCK OPTION AGREEMENT WITH JOHN BURDEN 1 EXHIBIT 10.3 NONEMPLOYEE DIRECTOR'S STOCK OPTION AGREEMENT THIS AGREEMENT is made this 19th day of August, 1997 but is effective as of the 17th day of June, 1997, between CHICO'S FAS, Inc., a Florida corporation ("Chico's") and John W. Burden, a nonemployee member of Chico's Board of Directors (the "Director"). W I T N E S S E T H WHEREAS, the Director is now a member of Chico's Board of Directors and Chico's desires to have the Director remain in its service and desires to encourage stock ownership by the Director and to increase the Director's proprietary interest in Chico's success; and as an inducement thereto has determined to grant to the Director the option herein provided for, to the end that the Director may thereby be assisted in obtaining an interest, or an increased interest, as the case may be, in the stock ownership of Chico's. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows: 1. Grant. Chico's hereby grants to the Director an option (the "Option") to purchase 10,000 shares of Chico's common stock, par value $.01 per share ("Common Stock") at $5.0625 per share, both as adjusted pursuant to Section 10 hereof. 2. Exercise. The Option may be exercised at any time during the period hereinafter permitted by presentation at the principal offices of Chico's in Ft. Myers, Florida of (a) written notice to Chico's advising Chico's of the election of the Director to purchase the shares of Common Stock covered by this Option and (b) payment of the aggregate option price therefor. 3. Period of Exercise. The Option is exercisable in whole or from time to time in part during the period from December 17, 1997 through June 17, 2007, except as provided in Section 8 hereof. 4. Vesting Schedule. The Optionee's rights under the Option shall vest 100% on December 17, 1997. 5. Requirements of Law. Chico's shall not be required to sell or issue any shares under the Option if the issuance of such shares shall constitute a violation of any provisions of any law or regulation of any governmental authority. Specifically, in connection with the Securities Act of 1933 (the "Act"), upon exercise of the Option, unless a registration statement under the Act is in effect with respect to the shares of Common Stock covered by the Option, Chico's shall not be required to issue such shares unless Chico's has received evidence reasonably satisfactory to the effect that the Director is acquiring such shares for investment and not with a view to the distribution thereof, and unless the certificate issued representing the shares of Common Stock bears the following legend: 2 "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS AMENDED AND APPLICABLE STATE SECURITIES LAWS." Any reasonable determination in this connection by Chico's shall be final, binding and conclusive. At such time as a registration statement under the Act is in effect with respect to the shares of Common Stock represented by certificates bearing the above legend or at such time as, in the opinion of counsel for Chico's, such legend is no longer required solely for compliance with applicable securities laws, then the holders of such certificates shall be entitled to exchange such certificates for certificates representing a like number of shares but without such legend. Chico's may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Act. Chico's shall not be obligated to take any other affirmative action in order to cause the exercise of the Option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority. 6. Method of Payment. Payment shall be made: (a) in United States dollars by certified check, or bank draft or (b) by tendering to Chico's Common Stock shares owned by the person exercising the Option and having a fair market value equal to the cash exercise price applicable to such Option, such fair market value to be the closing price, on the date in question (or, if no shares are traded on such day, on the next preceding day on which shares were traded), of the Common Stock as reported on the Composite Tape, or if not reported thereon, then such price as reported in the trading reports of the principal securities exchange in the United States on which such stock is listed, or if such stock is not listed on a securities exchange in the United States, the mean between the dealer closing "bid" and "ask" prices on the over-the-counter market as reported by the National Association of Security Dealers Automated Quotation System (NASDAQ), or NASDAQ's successor, or if not reported on NASDAQ, the fair market value of such stock as determined by the Board in good faith and based on all relevant factors, or (c) by a combination of United States dollars and Common Stock shares as aforesaid. 2. 3 7. Transferability of Option. The Option shall not be transferable by the Director otherwise than by will or the laws of descent and distribution, and shall be exercisable during his lifetime only by him. 8. Termination of Service, Death, Disability and Change in Control. Except as may be otherwise expressly provided in this Agreement, the Option herein granted shall terminate and all rights to exercise hereunder shall terminate (a) immediately in the event of the Director's discontinuance of service on Chico's Board of Directors as a result of his or her removal for cause and (b) seven (7) months after the date of the Director's discontinuance of service on Chico's Board of Directors for any other reason, other than death, disability or retirement. In the event of the death, disability or retirement of the Director while a member of the Board of Directors and before the date of expiration of the Option, the Option shall terminate and all rights to exercise hereunder shall terminate on the earlier of such date of expiration or one year following the date of such death, disability or retirement. After the death of the Director, his executors or administrators, or any person or persons to whom the Option may be transferred by will or by the laws of descent and distribution, shall have the right, at any time prior to such termination, to exercise the Option pursuant to the terms of this Agreement. If there shall occur a change in control of Chico's while any shares of Common Stock remain subject to this Option, then the Option shall become immediately exercisable without regard to Section 2 hereof and such exercisability shall terminate only pursuant to Section 2 hereof without regard to the other provisions of this Section 8. For purposes of this Agreement, a "change in control" of Chico's shall mean a change in control of a nature that would be required to reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1931 (the "Exchange Act") as in effect on the date hereof; provided, that, without limitation, such a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the Exchange Act and other than the persons who are directors on the date of this Agreement) is or becomes the beneficial owner, directly or indirectly, of securities of Chico's representing 20% or more of the combined voting power of Chico's then outstanding securities or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Chico's cease for any reason to constitute at least a majority thereof. 9. No Rights as Stockholder. The Director shall have no rights as a stockholder with respect to shares covered by the Option until the date of issuance of a stock certificate for such shares; no adjustment for dividends, or otherwise, except as provided in 3. 4 Section 10, shall be made if the record date therefor is prior to the date of exercise of such option. 10. Stock Adjustments. (a) In the event of any increase or decrease in the number of issued shares of Common Stock resulting from a stock split or other division or consolidation of shares or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of such shares effected without any receipt of consideration by Chico's, then, in any such event, the number of shares of Common Stock covered by the Option, and the purchase price per share of Common Stock covered by the Option shall be proportionately and appropriately adjusted for any such increase or decrease. (b) Subject to any required action by the stockholders, if any change occurs in the shares of Common Stock by reason of any recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or of any similar change affecting the shares of Common Stock, then, in any such event, the number and type of shares covered by the Option, and the purchase price per share of Common Stock covered by the Option, shall be proportionately and appropriately adjusted for any such change. A dissolution or liquidation of Chico's shall cause each outstanding Option to terminate. (c) In the event of a change in the Common Stock as presently constituted that is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any change shall be deemed to be shares of Common Stock within the meaning of this Agreement. (d) To the extent that the foregoing adjustments relate to stock or securities of Chico's, such adjustments shall be made by, and in the discretion of, the Board, whose determination in that respect shall be final, binding and conclusive. (e) Except as hereinabove expressly provided in this Section 10, the Director shall have no rights by reason of any division or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger or consolidation, or spin-off of assets or stock of another corporation; and any issuance by Chico's of shares of stock of any class, securities convertible into shares of stock of any class, or warrants or options for shares of stock of any class shall not affect, and no adjustment by reason thereof shall be made with respect to, 4. 5 the number or price of shares of Common Stock subject to the Option. (f) The grant of this Option shall not affect in any way the right or power of Chico's to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate, or to dissolve, to liquidate, to sell, or to transfer all or any part of its business or assets. 11. Withholding. It shall be a condition to the obligation of Chico's to issue Common Stock shares upon exercise of an Option, that the Director (or any beneficiary or person entitled to act under Section 8 above) pay to Chico's, upon its demand, such amount as may be requested by Chico's for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, Chico's may refuse to issue Common Stock shares. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CHICO'S FAS, INC. By: /s/ Marvin J. Gralnick ----------------------------------- President /s/ John W. Burden -------------------------------------- John W. Burden, Director 5. EX-10.4 5 STOCK OPTION AGREEMENT WITH VERNA GIBSON (6/17/97) 1 EXHIBIT 10.4 NONEMPLOYEE DIRECTOR'S STOCK OPTION AGREEMENT THIS AGREEMENT is made this 19th day of August, 1997 but is effective as of the 17th day of June, 1997, between CHICO'S FAS, Inc., a Florida corporation ("Chico's") and Verna K. Gibson, a nonemployee member of Chico's Board of Directors (the "Director"). W I T N E S S E T H WHEREAS, the Director is now a member of Chico's Board of Directors and Chico's desires to have the Director remain in its service and desires to encourage stock ownership by the Director and to increase the Director's proprietary interest in Chico's success; and as an inducement thereto has determined to grant to the Director the option herein provided for, to the end that the Director may thereby be assisted in obtaining an interest, or an increased interest, as the case may be, in the stock ownership of Chico's. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows: 1. Grant. Chico's hereby grants to the Director an option (the "Option") to purchase 5,000 shares of Chico's common stock, par value $.01 per share ("Common Stock") at $5.0625 per share, both as adjusted pursuant to Section 10 hereof. 2. Exercise. The Option may be exercised at any time during the period hereinafter permitted by presentation at the principal offices of Chico's in Ft. Myers, Florida of (a) written notice to Chico's advising Chico's of the election of the Director to purchase the shares of Common Stock covered by this Option and (b) payment of the aggregate option price therefor. 3. Period of Exercise. The Option is exercisable in whole or from time to time in part during the period from December 17, 1997 through June 17, 2007, except as provided in Section 8 hereof. 4. Vesting Schedule. The Optionee's rights under the Option shall vest 100% on December 17, 1997. 5. Requirements of Law. Chico's shall not be required to sell or issue any shares under the Option if the issuance of such shares shall constitute a violation of any provisions of any law or regulation of any governmental authority. Specifically, in connection with the Securities Act of 1933 (the "Act"), upon exercise of the Option, unless a registration statement under the Act is in effect with respect to the shares of Common Stock covered by the Option, Chico's shall not be required to issue such shares unless Chico's has received evidence reasonably satisfactory to the effect that the Director is acquiring such shares for investment and not with a view to the distribution thereof, and unless the certificate issued representing the shares of Common Stock bears the following legend: 2 "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS AMENDED AND APPLICABLE STATE SECURITIES LAWS." Any reasonable determination in this connection by Chico's shall be final, binding and conclusive. At such time as a registration statement under the Act is in effect with respect to the shares of Common Stock represented by certificates bearing the above legend or at such time as, in the opinion of counsel for Chico's, such legend is no longer required solely for compliance with applicable securities laws, then the holders of such certificates shall be entitled to exchange such certificates for certificates representing a like number of shares but without such legend. Chico's may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Act. Chico's shall not be obligated to take any other affirmative action in order to cause the exercise of the Option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority. 6. Method of Payment. Payment shall be made: (a) in United States dollars by certified check, or bank draft or (b) by tendering to Chico's Common Stock shares owned by the person exercising the Option and having a fair market value equal to the cash exercise price applicable to such Option, such fair market value to be the closing price, on the date in question (or, if no shares are traded on such day, on the next preceding day on which shares were traded), of the Common Stock as reported on the Composite Tape, or if not reported thereon, then such price as reported in the trading reports of the principal securities exchange in the United States on which such stock is listed, or if such stock is not listed on a securities exchange in the United States, the mean between the dealer closing "bid" and "ask" prices on the over-the-counter market as reported by the National Association of Security Dealers Automated Quotation System (NASDAQ), or NASDAQ's successor, or if not reported on NASDAQ, the fair market value of such stock as determined by the Board in good faith and based on all relevant factors, or (c) by a combination of United States dollars and Common Stock shares as aforesaid. 2. 3 7. Transferability of Option. The Option shall not be transferable by the Director otherwise than by will or the laws of descent and distribution, and shall be exercisable during his lifetime only by him. 8. Termination of Service, Death, Disability and Change in Control. Except as may be otherwise expressly provided in this Agreement, the Option herein granted shall terminate and all rights to exercise hereunder shall terminate (a) immediately in the event of the Director's discontinuance of service on Chico's Board of Directors as a result of his or her removal for cause and (b) seven (7) months after the date of the Director's discontinuance of service on Chico's Board of Directors for any other reason, other than death, disability or retirement. In the event of the death, disability or retirement of the Director while a member of the Board of Directors and before the date of expiration of the Option, the Option shall terminate and all rights to exercise hereunder shall terminate on the earlier of such date of expiration or one year following the date of such death, disability or retirement. After the death of the Director, his executors or administrators, or any person or persons to whom the Option may be transferred by will or by the laws of descent and distribution, shall have the right, at any time prior to such termination, to exercise the Option pursuant to the terms of this Agreement. If there shall occur a change in control of Chico's while any shares of Common Stock remain subject to this Option, then the Option shall become immediately exercisable without regard to Section 2 hereof and such exercisability shall terminate only pursuant to Section 2 hereof without regard to the other provisions of this Section 8. For purposes of this Agreement, a "change in control" of Chico's shall mean a change in control of a nature that would be required to reported in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1931 (the "Exchange Act") as in effect on the date hereof; provided, that, without limitation, such a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the Exchange Act and other than the persons who are directors on the date of this Agreement) is or becomes the beneficial owner, directly or indirectly, of securities of Chico's representing 20% or more of the combined voting power of Chico's then outstanding securities or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of Chico's cease for any reason to constitute at least a majority thereof. 9. No Rights as Stockholder. The Director shall have no rights as a stockholder with respect to shares covered by the Option until the date of issuance of a stock certificate for such shares; no adjustment for dividends, or otherwise, except as provided in 3. 4 Section 10, shall be made if the record date therefor is prior to the date of exercise of such option. 10. Stock Adjustments. (a) In the event of any increase or decrease in the number of issued shares of Common Stock resulting from a stock split or other division or consolidation of shares or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of such shares effected without any receipt of consideration by Chico's, then, in any such event, the number of shares of Common Stock covered by the Option, and the purchase price per share of Common Stock covered by the Option shall be proportionately and appropriately adjusted for any such increase or decrease. (b) Subject to any required action by the stockholders, if any change occurs in the shares of Common Stock by reason of any recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or of any similar change affecting the shares of Common Stock, then, in any such event, the number and type of shares covered by the Option, and the purchase price per share of Common Stock covered by the Option, shall be proportionately and appropriately adjusted for any such change. A dissolution or liquidation of Chico's shall cause each outstanding Option to terminate. (c) In the event of a change in the Common Stock as presently constituted that is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any change shall be deemed to be shares of Common Stock within the meaning of this Agreement. (d) To the extent that the foregoing adjustments relate to stock or securities of Chico's, such adjustments shall be made by, and in the discretion of, the Board, whose determination in that respect shall be final, binding and conclusive. (e) Except as hereinabove expressly provided in this Section 10, the Director shall have no rights by reason of any division or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger or consolidation, or spin-off of assets or stock of another corporation; and any issuance by Chico's of shares of stock of any class, securities convertible into shares of stock of any class, or warrants or options for shares of stock of any class shall not affect, and no adjustment by reason thereof shall be made with respect to, 4. 5 the number or price of shares of Common Stock subject to the Option. (f) The grant of this Option shall not affect in any way the right or power of Chico's to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate, or to dissolve, to liquidate, to sell, or to transfer all or any part of its business or assets. 11. Withholding. It shall be a condition to the obligation of Chico's to issue Common Stock shares upon exercise of an Option, that the Director (or any beneficiary or person entitled to act under Section 8 above) pay to Chico's, upon its demand, such amount as may be requested by Chico's for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, Chico's may refuse to issue Common Stock shares. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CHICO'S FAS, INC. By: /s/ Marvin J. Gralnick --------------------------------- President /s/ Verna K. Gibson ------------------------------------ Verna K. Gibson, Director 5. EX-27 6 FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) OF CHICO'S FAS, INC. FOR THE TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JAN-31-1998 FEB-2-1997 AUG-2-1997 5,283,212 0 761,541 0 6,193,796 13,760,476 22,967,592 5,953,007 33,661,470 6,901,021 5,530,545 0 0 78,991 19,948,057 33,661,470 38,800,371 38,800,371 17,278,890 17,278,890 18,035,809 0 202,660 3,283,012 1,313,000 1,970,012 0 0 0 1,970,012 .25 .25
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